Your March 21 column from Beijing, "The Cultural Revolution,"
argues that the people of China are happy with the authoritarian government in
Beijing because the economy is expanding, but they will be unhappy with the
central government and demand democracy as soon as the economy goes into a
recession. Your previous columns from China indicate there is already a
serious degree of democracy at the local level, and that there are increasing
signs that it is moving up the political pyramid. You are discovering what I
found on a two-week trip to China in September 1983, almost 15 years ago. My
letter to clients of Polyconomics, dated October 4, 1983, argued that China
was well on the road to capitalism and that it would have to add democratic
features in its next stage of development. My report was the first of its
kind, totally at odds with the reports of our national press corps. Max
Frankel, who was editor of the Times editorial page, saw my report and asked
me to write a short op-ed, which he ran in the October 25th issue. I append it
here so you will appreciate how far in advance I was, not only relative to the
American press but to the Central Intelligence Agency, which still does not
know what is going on, despite the fact that we annually spend almost $30
billion on its budget.

If you don't mind my saying so, you do not have
it quite right yourself A recession will only slow the advance of democracy in
China. Anytime a national population is under the stress of economic
contraction, there is more, not less, demand for government intervention.
That's how we got New Deal socialism out of the Great Depression. What is
happening in China is a continuation of what I found in 1983 and on the
several trips I've made to China since then. The political establishment in
China is building its system from the ground up, the way a man will build a
house. Each step of the way takes time, because there are several thousand
experiments in democracy underway all across the nation. Those that succeed
become role models for those less successful. "Rome was not built in a day,"
an idea ignored in the NYTimes' support of Jeffrey Sachs and his
"shock therapy" approach to building a capitalist democracy in what had been
the USSR.

As long as you keep an open mind, Tom, you will be able to
see China's development along the line I suggest. In the 15 years I have been
advising the Chinese government, pro bono when asked for my advice,
I've encouraged it to ignore western advice about national elections, that
they knew better how to build a solid structure that would be able to
challenge U.S. primacy in 30 or 40 years. They could not believe an American
would be telling them this kind of years. They could not believe an American
would be telling them this kind of thing, but I explained that I believe in
competition, and I'm afraid that unless we have a serious challenge from
China, we will become fat, lazy, corrupt and imperialistic in mentality — a
global bully boy. To challenge our primacy, I suggested they think not of
democratic elections, but of constitutional democracy. I told them that if
there was one thing I would wish for them and their people, it would be the
equivalent of our First Amendment. In your column, you touch on the idea that
with television sets, they now have one-way communication from the government
to the people, and the next stage will give the people telephones. This is not
quite what I meant.

There is now two-way communication between the
people and the government, which Americans never quite see. This is the result
of 3000 years of Confucian meritocracy, which makes China much more democratic
than India. That is, China has a fluid society, like ours. Any Chinese can
aspire to become the leader of the nation, because the mechanisms developed
over three millennia have this idea as a central paradigm. Even at the height
of the Cultural Revolution and Maoist communism, the decision was made to
force the elites to work on the pig farms. Zhu Rongzhi, who will be the new
boss, was one such elitist, and he remembers it was not a nice experience, but
he also will never forget what it is like to slop pigs. On the other hand,
India has elections, but also a stratified social system that prevents
communication from bottom to top. India has telephones and newspapers, but its
power elite has arranged to keep all relevant power in its own
hands.

In any case, you do seem to be on a learning curve, which is
more than I can say for Abe Rosenthal, who looks at China and sees only people
who are jailed for breaking laws that he does not approve of, and looks at
India, where he once served as Delhi bureau chief, and sees laws he likes and
democratic forms, which excuse the abject poverty. Abe is also on a learning
curve, but one that points down.

* * * * *

The New York Times -- October 25,
1983

China's Capitalist Road by Jude Wanniski

MORRISTOWN, N. J.
-- In my first visit to China, last month, to look at the economy, two things
astonished me. I found an economic boom unfolding whose implications are
exciting for the world, and never once during nine days in Peking and Shanghai
did I feel I was in a Communist country. China is running, not walking, down
the capitalist road.

Yes, there have been steady reports of Deng
Xiaoping's liberal economic reforms bringing economic improvements. But
nothing had prepared me for the dynamism of the economy and the vitality of
the people. Nor was I prepared for the total absence of interest in the
Communist idea among the people and in the Government. Unlike the Soviet
Union, plastered with Marxist slogans and portraits of Lenin, China displays
no sloganeering and only one outdoor portrait of Chairman Mao that I could see
— a relatively small picture facing the Chairman Mao Memorial Hall on Tian An
Men Square. It is half the size of a Sony billboard down the
street.

The Shanghai People's Acrobatic Troupe has changed its name to
Shanghai Acrobatic Troupe. When I suggested to a Government tour guide that
perhaps the state will also change its name, to the Republic of China, he
insisted this could happen "only for purposes of shortening."

The
Communist Party is expelling all egalitarian opponents of the Government's
capitalist reforms — that is, all known Communists are being purged from the
party.

The China Daily, a Government-published
English-language newspaper with an upbeat, free-enterprise flavor and Wall
Street market news, reports that 70,000 private enterprises were registered in
Shanghai alone last year — an individual is now permitted to hire up to 11
employees.

The boom is evident in the cities and the countryside. It's
seen in the markets, with good produce plentiful and in shops, bulging with
consumer goods and apparel that put Moscow's finest department stores to
shame. It's seen in the housing and building construction all about. Mostly,
it's seen in the briskness of the people, freed from the ideological
penitentiary that the Soviet people still occupy, free to exploit their own
energies and abilities in exchange for commensurate rewards.

The
"responsibility system," involving "rights, duties and benefits," has
effectively ended communal enterprises in favor of co-operatives. The co-ops
are still called communes, but economic decision-making has shifted to the
family unit. Families can join with other families and take responsibility for
meeting the state's quota, or tax, on a parcel of land. The group gets to keep
the proceeds of any surplus and also has a degree of discretion on crops and
livestock to be raised. An elected communal board decides on the portion of
surplus that should go into capital investment. And workers supplement their
income on private plots.

The responsibility system also seems to be
working well in light industry and in retailing, where it's possible for
smaller groups to supervise the link between individual effort and reward.
Shop clerks seem extraordinarily motivated — they can earn up to four or five
times the monthly wage in bonuses keyed to the profits of the state-owned
shops.

The system hasn't worked as well in heavy industry, and since
1978, when Mr. Deng began the incentives, several approaches have been tried
and abandoned in the steel mills, chemical and auto plants. In these more
complex state enterprises, effort and reward have to be balanced at several
levels of capital and labor, to avoid inefficient taxing or subsidizing of
either. The Government is still tinkering; a new incentive system was begun
June 1, I heard.

All of this suggests that Deng Xiaoping's goal of a $1
trillion gross national product by the year 2000, from the current $400
billion, is realistic. The goal almost seems too modest, given the likelihood
that there will be 1.25 billion people by 2000, even if the current extremely
low birth rate holds up.

Unfortunately, liberal economic reforms have
not been matched by liberal political reforms. Mr. Deng is a capable political
leader, but he's still a dictator. Students with whom I talked at universities
in Peking and Shanghai had every reason to worry that, in the absence of
democratic reforms, Mr. Deng would surely be succeeded by a less capable
dictator.

Unless there are political channels that permit the masses of
people to determine policy through their leaders, economic reforms can go only
so far before new stagnation sets in. The Maoist reactionaries are waiting to
say we told you so, to reassert their views through a power elite. Mr. Deng
knows this, which is why the purge is on. Only a gamble on democracy can carry
China to the economic goals Mr. Deng envisions.